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The real Swedish jobless rate is 15 percent
You might think this post is "libertarian cackling with glee," but in fact I was surprised to see this. The problem is also expected to get worse, read the whole thing.
Posted by Tyler Cowen on June 15, 2006 at 08:30 AM in Data Source | Permalink
Comments
I wonder how much the government's reported rate would differ from an independent study in the U.S.?
Posted by: Jake at Jun 15, 2006 9:24:45 AM
Since I don't have any fairly unbiased numbers for the real joblessness rate in the US, I don't know what to make of these numbers.
Posted by: michael vassar at Jun 15, 2006 9:40:27 AM
I wonder what percentage of the unemployed are immigrants? Muslims immigrants, from what I understand, have a very high rate of unemployment in Scandinavia.
This site points out the phenomena in neighboring Denmark:
http://drhelen.blogspot.com/2006/02/need-welfare-check-just-threaten-to.html
Posted by: mike at Jun 15, 2006 9:47:18 AM
Couldn't we compare participation for a better read on what this means?
I remember in comparing France's youth unemployment rate to the US, the participation and a better understanding of education participation made a big difference.
Not a very informative article, but perhaps the study has more. This line is a little puzzling:
"indicate unemployment is set to rise further, with between 100,000 and 200,000 jobs outsourced to cheaper countries over the next 10 years if no corrective action is taken."
I am no economist, but isn't that a non sequitar - The jobs will be done by people who will do them for less money, and then the people in Sweden who were doing those jobs will be forced to sit on their hands? How does that follow? Isn't there something called comparative advantage that is supposed to benefit both Sweden and the countries they outsource to?
Posted by: theCoach at Jun 15, 2006 9:54:28 AM
As much as I'd like to join in the cackling with glee, some perspective first. Sweden's labor force participation rate is 63.7 percent (see here). This compares with a labor force participation rate of around 66 percent for the United States. So no cackling just yet.
Posted by: Javier at Jun 15, 2006 10:01:13 AM
Javier has it right. even more importantly, the employment to population ratio is 47.7% in Sweden, and 47.4% in the US, so whatever their unemployment rate may be, they've still got more jobs.
Posted by: Ian D-B at Jun 15, 2006 11:12:04 AM
This is one of those periodically appearing articles that
trumpets that the Swedish model is about to commit suicide,
doom and gloom, etc. The quick overview is that in some sense
the Swedish model died 20 years ago when their nationwide
collective bargaining arrangement broke down, arguably up
until then a successful form of Post Keynesian policy. Their
macro performance had been spectacular, very low unemployment
and inflation by any measure on a world scale. The main
problem had been a gradual downward drift of real per capita
income from being in the top three (with US and Switzerland)
into the teens or even 20s where they are today.
After this breakdown, inflation soared triggering a political
shift in 1990. There were major fiscal cutbacks and tax changes
and the unemployment rate soared. Sweden became a "normal"
country in which inflation is at least partly tamed by the
threat of unemployment. At the time there were many articles
along lines very similar to this one predicting doom and gloom
and that the unemployment rate would not come back down again
(it was well over 10% officially at one point).
Well, the unemployment rate came back down and Sweden began
growing fairly respectably again, although it has not regained
its high real per capita income status. That there are people
on retraining and makework programs was true then and is not
more true today.
Most of the scary part of this article is about projected job
losses due to possible outsourcing. But why is Sweden in any
more danger from this than the US or any of the other high
income European countries? Nothing is stated along those lines.
Indeed, compared to most of the rest of Europe, Sweden looks
pretty good on the unemployment front these days, although it
did not in the early 1990s.
Finally, maybe it is on the edge of a cliff and will fall off,
as has been predicted so many times over the last several decades,
but Sweden still sits pretty high up. The summary had it falling
from 5th to "112th" in "welfare," whatever that is, although probably
that should have read "12th." But that does not accord with the
numbers I see. According to the latest UN Human Development
Report, Sweden is still in third place on the overall Quality of
Life index (Human Development Index), that combines life expectancy
with education with real income. It was behind only Norway and
Iceland. It is still Number One on quality of life for women
and Number One on the probability that a five year old male will
live to 65. However, it has fallen to second place in having the
world's lowest poverty rate, behind neighboring Finland, who is
more vigorous about keeping out immigrants.
I do hear anecdotes. So, I have a good friend who is one of
the few conservative economists in Sweden (he is from Estonia
originally). He complains that he is on a waiting list to get
his back problem fixed, and that his son cannot get a job. The
son composes very esoteric modern classical music. I wish him
the best, but also suspect he might be having trouble getting a
job in that field in the US as well.
Posted by: Barkley Rosser at Jun 15, 2006 11:30:37 AM
Tyler,
"Real" jobless rate? Give me a break.
So McKinsey has a crack survey team these days. Strange, I thought they specialized in giving advice to top management teams.
Last line from the article:
"According to the Organisation for Economic Co-operation and Development, Sweden had dropped from fifth position in its welfare ranking to 112th in 2004."
Huh? I live in Sweden. If we are nr 112 in the welfare ranking in the world, the world has become a really rich place very fast.
Javier,
according to Statistics Sweden, the labor force participation rate is 73 % for 2004 (se link http://www.scb.se/templates/tableOrChart____23314.asp , in Swedish but the graph should be readable for everybody). Differences in methodology?
Posted by: Dan K at Jun 15, 2006 11:39:12 AM
Barkley,
Arguably, the relative downward drift in the real per capita income in Sweden (in absolute terms, real per capita income has increased, at least sinced 1999) has been caused by a preference in trading work hours for leisure, no?
Posted by: Dan K at Jun 15, 2006 11:59:17 AM
I've read about this before, a year ago:
http://truckandbarter.com/mt/archives/2005/06/how_high_is_tot.html
The "real rate" there is calculated at 19.8%.
http://stefanmikarlsson.blogspot.com/2005/11/does-sweden-defy-economic-logic.html
Stefan Karlsson points out that
"And if you look beneath the aggregate production figures you see deep structural problems. the number of people employed is now 6% lower than in 1990, a weaker development than in any other western economy. By contrast, even with the by American standards weak job growth in recent years, employment in America is 20% higher than in 1990."
"The headline unemployment rate in Sweden is only 5-5.5%, but this number is extremely misleading as it only includes a small number of the people who the government pays not to work. Many unemployed are sent to so-called "labor market political activities" who have no meaningful purpose then to reduce the headline unemployment number. Including them, unemployment is 8%. And if you also include the enourmous number of early retirees and people who live of sickness benefits, the real unemployment rate is more like 25% rather than 5%. The number of early retirees are 540,000, more than double the number of officially unemployed.
Among non-Western immigrants, the real unemployment rate is more than 50%."
Posted by: Sean at Jun 15, 2006 12:00:03 PM
This number is totally bogus. It includes people on disability and sick leave. Granted generous payoffs may encourage people to take these, but this isn't what's going on. As the labor to employment ratios suggest, Sweden still manages to have more jobs. The comparable "employment rate" as defined by McKinsey would probably be about the same for the U.S. For one, there are 6 million people on disability insurance (Gruber, JPE 2000) that the U.S. government doesn't count as unemployed but McKinsey would.
Posted by: John at Jun 15, 2006 12:16:50 PM
It definately depends on the definitions. The U.S. uses the "U-3" measure, but there are others. Here is the current table A-12 from the BLS:
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian
labor force........................................................... 1.5
U-2 Job losers and persons who completed temporary jobs, as a percent of
the civilian labor force.............................................. 2.3
U-3 Total unemployed, as a percent of the civilian labor force (official
unemployment rate).................................................... 4.6
U-4 Total unemployed plus discouraged workers, as a percent of the civilian
labor force plus discouraged workers.................................. 4.8
U-5 Total unemployed, plus discouraged workers, plus all other marginally
attached workers, as a percent of the civilian labor force plus all
marginally attached workers........................................... 5.5
U-6 Total unemployed, plus all marginally attached workers, plus total
employed part time for economic reasons, as a percent of the civilian
labor force plus all marginally attached workers...................... 8.2
NOTE: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a
job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason
for not currently looking for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had
to settle for a part-time schedule. For further information, see "BLS introduces new range of alternative unemployment measures," in the October 1995
issue of the Monthly Labor Review. Beginning in January 2006, data reflect revised population controls used in the household survey.
Posted by: Patinator at Jun 15, 2006 12:43:22 PM
It would be more to the point to consider how people live in Sweden. Has their standard of living increased in the last ten years as it has here? Also, how about the ability to start a business, to work for oneself? I've heard that's almost impossible in Sweden, because of the bureaucracy and employment taxes. But maybe a lot of those people on "sick leave" are really fixing cars or designing websites on the side, without telling anyone, to avoid the stupid regulations. It's a lot easier to have a "black economy" job if you're getting welfare or disability payments and have free health care. Even governments cannot keep everyone from bettering themselves.
Posted by: Robert Speirs at Jun 15, 2006 2:05:33 PM
"And if you also include the enourmous number of early retirees and people who live off sickness benefits, the real unemployment rate is more like 25% rather than 5%."
People in those categories certainly aren't unknown in the United States.
Posted by: Peter at Jun 15, 2006 2:32:37 PM
Robert Speirs,
Actually Sweden is up there with Finland as being one of the most
highly rated countries in the world for "competitiveness." They
do not have lots of regulations. It is much easier to start a
business there than in most countries. The big problem they have
is high taxes. That is where they stick out.
I am not going to wade into the numbers debate on jobs. Yes, they
have big retraining programs. Yes, they also have a very high
labor force participation rate, higher than the US on numbers I have
seen. Almost nobody beats them on female lfpr. And, of course, the
US has a much larger chunk of its working age population in prison
than Sweden or pretty much any other high income country.
It remains not obvious to me that Sweden is all that bad on the
employment front, maybe in comparison with the US, but certainly
not in comparison with say France or Germany or Italy. And as for
this outsourcing threat, one advantage of the decline in real wages
is that they do not look nearly as endangered on this front as higher
wage countries like Germany.
Posted by: Barkley Rosser at Jun 15, 2006 3:18:46 PM
"High taxes" isn't the full story, either. Employers and employees would want to consider taxes in Sweden vs. taxes + health insurance premiums in the US. Employees with children might also consider US private schooling costs (if used) and day care (ditto). I don't know how these totals actually compare, apart from the US spending 4-5% GDP more than the next country on health care, in large part from private pockets, but I wouldn't be surprised by US tax+premiums being comparable to Swedish tax.
Posted by: Damien at Jun 15, 2006 3:47:44 PM
I for one don't pay 60%+ of my income in taxes and premiums, I don't know about you.
Posted by: Noah Yetter at Jun 15, 2006 3:51:50 PM
An essay on the same subject at
http://www.nationalinterest.org/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications::Article&mid=1ABA92EFCD8348688A4EBEB3D69D33EF&tier=4&id=467A023F1D434471A3996995DEA0A05B
The author estimates an unemployment rate of 20 percent,
while the official swedish unemployment rate is six percent.
Included in Johan Norberg's estimate, but not included in
the government figures are people working in government
"labour-market projects", students seeking jobs, and
people who want unemployment but aren't considered part of the
national workforce.
Also included in Norberg's twenty percent unemployment
estimate are the ten percent of the working age population
retired with disability benefit. This may seem inappropriate
but the percentage is so large.
Not included, but mentioned, is the disproportionately large
percentage of the working population that is out on sick leave
at any given moment.
Briefly touched on is the low percentage of the population
with full-time jobs in the private sector.
"Amazingly, not a single net job has been created in the
private sector in Sweden since 1950."
A key question to my mind: Are public sector jobs really
the same thing as private sector? Are we counting apples
and oranges?
After all with private sector jobs we don't worry whether
they're productive. If they weren't productive they wouldn't
be there.
Posted by: Mark Amerman at Jun 15, 2006 3:53:06 PM
Here's a diary on DailyKos from this morning where a blogger attempts (or claims to attempt, anyhow) to apply the same methodology to the U.S. labor market:
http://www.dailykos.com/story/2006/6/15/82034/1813
Whether it's apples to apples I can't really say.
My own read on the U.S. situation is that labor force participation rate might tell a more accurate story than the unemployment rate. While the unemployment rate looks great right now I do believe that LFPR has fallen by at least a few percentage points since the late 90s. That might indicate that there's more slack in the labor market than the unemployment rate would convey.
As a recent graduate(degree in Econ from GMU, no less) currently looking for work right now my gut feeling is that the labor market is significantly weaker than it was in the late 90s. When I hear "unemployment is 4.7%" I don't think that tells the full story.
Posted by: MjrMjr at Jun 15, 2006 5:02:08 PM
MirMir:
The Kos report loses credibility with the "Excess Military" and "Excess Incarcerated."
The "Excess Military" is particularly erroneous, as seems to assume that anyone who was NOT serving in the military would be unemployed. In fact, based on the metric of IQ (ASVAB) scores, educational attainment, criminal record, health, and substance abuse problems or lack thereof, the average member of the military would be a better employee than the average American.
I don't know what "Excess Incarcerated" means; presumably, anyone in prison would be on welfare if they were out. This is probably also a stretch, considering the number of people serving time in US prisons on drug-related charges (marijuana posession comes to mind) who held jobs and contributed before they fell afoul of the US's draconian drug policies.
Posted by: bristlecone at Jun 15, 2006 6:16:12 PM
MirMir,
Too bad Colman at DailyKos doesn't give us the links so we can
go see what he's looking at for ourselves. I wonder why?
Why would someone who just looked it up this morning not
include those links?
His two biggest factors contributing to his estimate for
higher U.S. unemployment are involuntary part-time at 2.7%
and employment disability at 3.7%. He admits his numbers
on employment disability are an estimate. How he made the
estimate is interesting, he imagined two scenarios. The
first where everyone who had an employment disability was
unemployed and a second where 40% of those with an employment
disability are unemployed. Then he took the average of those
two scenarios.
Where'd the 40% figure come from? Well the only number he
was able to come up with on the subject (and of course no
source) was a claim of 40% unemployment.
Well in that case doing the math -- except wait -- the math
is hard because Colman doesn't actually give us any numbers,
only percentages, and we are not told what number of people
constitute his definition of full employment so we can back
it out and add things up.
Still we can do some math. The net effect of his manipulations
are to assume an unemployment of 70% among those with employment
disabilities. Curious.
When by his own account the only piece of data he had was
an assertion of 40% unemployment.
Another thing frustrating about Colman's piece is that he includes
a link to the chart he's criticizing, and yet nothing to the report
that's obviously around it. Could it be that Colman doesn't
want his readers to read what it is he's talking about, except
as a brief news report?
Well as out-of-context as 'Exhibit 6' is it does manage to include
the actual number of people alleged to fall in different categories.
One column Colman didn't try to imitate was that of "Latent job
candidates". Some 140,000, aka a percentage point or two of the
Swedish labor market, are people who are "want to work and can
start within 14 days." Why in the world isn't that included in
the official Swedish labor statistics? What's the story here?
Posted by: Mark Amerman at Jun 15, 2006 6:55:46 PM
Newsflash:
When you include people who aren't unemployed in unemployment statistics, unemployment, shockingly enough, seems higher!
Aren't we all glad we have think tanks to provide material for our echo chambers?
Posted by: felix at Jun 16, 2006 2:44:13 AM
As to "excess incarceration" it would be well to remember that many of the imprisoned - even those nominally incarcerated for "drug crimes" - pose threats of violent criminality and have limited productive skills. In Sweden they're walking around, threatening people. And many of the incarcerated in the US are producing some value, working at various jobs within their skill levels. Freeing violent criminals may not be the best tactic to stimulate the economy, unless you're in the funeral business.
Posted by: Robert Speirs at Jun 16, 2006 9:29:26 AM
Robert,
First of all, Sweden does not have nearly the crime rate we do.
One is a whole lot safer walking around the streets of Stockholm
than one is the streets of Houston, even though we have many more
in jail and are imposing the death penalty, especially in Texas,
where a recent governor signed more death warrants than any governor
in US history. I would remind that although Prime Minister Olof Palme
was gunned down on a street in Stockholm, people were genuinely shocked,
even though he was walking around with no security personnel whatsoever.
Can you imagine a US president doing that other than on his ranch maybe?
Of course a huge percentage of those in jail in the US are in for marijuana
possession. They are not violent. This is just stupid social policy,
unless of course it is a convenient way to reduce labor force participation.
Again, I am not all that worked up about the detailed numbers and data games
people have engaged in here. The big picture is that Sweden really did have
exceptionally low unemployment and low inflation prior to the mid-1980s, but
since then has been more like other high income, capitalist countries, including
the US, in that inflation is partly kept in line by the threat of unemployment.
Sweden's unemployment situation is not obviously much worse than many other
countries, although it may well be worse than its official numbers say, just
as the US's situation is probably worse than its official numbers say.
All of the high income countries face threats from outsourcing, but offhand I
do not see Sweden as in any particularly greater danger than any other one of
them. Indeed, given its relatively good position vis a vis business regs, it
may be in better shape than many, although its high taxes certainly remain a
problem from the perspective of many.
Posted by: Barkley Rosser at Jun 16, 2006 4:15:08 PM
Well Mark, among the possibilities for the bad linkage could be rushing to produce the diary in a short time and the fact that the links to the other info were at most a click or two away from the links given. I wasn't writing an academic paper and I sort of assumed anyone who really cared would be able to work it out for themselves. Sorry about that.
The excess military and excess incarcerated are of course arguable, but so is assuming that anyone in a government training programme would otherwise be unemployed. There are two points here: the FT headline claiming a 15% joblessness rate in Sweden is meaningless if you don't know that (say) France and Germany would be comparable while the US wouldn't be that far behind: I don't see how you could possibly do a similar calculation for the US and not arrive at 10% given the BLS figures above. The second point is that attempting to compare unemployment figures without regard for the structural choices made by the economies in question is nonsense. The US chooses to provide a lot of employment for poor young men and women through its military. It also locks a lot of them up. Those choices affect the labour market and need to be taken into account when comparing figures.
I'm not even going to attempt to defend the disability figures - they need a lot more thought before I'd be happy with them. It could be 2%, it could be 4%. Of course, it also raises the issue of how disabled is disabled enough that the society chooses to support that person instead of forcing them to work?
Posted by: Colman at Jun 17, 2006 10:57:00 AM
Colman,
When you don't link to the paper you're criticizing
it may be an oversight, but it is something I think
you should apologize for. Not criticize your readers
on the basis they should have been able to search
for and find it.
Most people don't click on links anyway. Very few
are going to off on google search for an essay they
don't even know the name of.
I don't know whether it's occurred to you yet, but
you've actually double-counted the people with employment
disabilities. That is by your account the one figure
you were able to come up with on the disabled was
that of 40% unemployment. If so then they are already
in the official unemployment numbers. You've added
that 40% in again and then stuck an additional 30%
on top of it.
Actually I'm kind of amazed because either way the
implication is a large percentage of the unemployed
are people with disabilities, something that had
never occurred to me and that puts a different
complexion on things.
I agree with you that U.S. unemployment figures
would be higher if the same standard were applied
to the U.S. I don't think we know what that number
would be and that if such an estimate is to be
valuable it should be done as cautiously and
carefully as possible.
The question is whether a cautious and careful
standard was applied to Sweden.
Let me stage a little thought experiment. You
state that "so is assuming that anyone in a government
training programme would otherwise be unemployed."
I'm pretty sure that the overwhelming majority,
and possibly all, of the people sent to government
training programmes in Sweden are sent because they
are looking for a job and can't find one. And
it's a large group of people, the biggest factor
pushing an estimate of unemployment higher.
But that isn't the thought experiment. The thought
experiment is this: Do you realize how easy it would
be to do the same thing in the U.S and 'eliminate'
unemployment all together? That is send them to
a training programming -- indefinitely if necessary
-- and voila they are not unemployed.
The largest group of people of people in Sweden that
some think should be counted as unemployed but aren't
included in the official figures is this group of people
in the training programs. The second largest, students
seeking jobs who can't find them, is in a similar
situation. According to the Swedish government if
you're a student you can't be unemployed; it doesn't
matter if you can't find a job and want one.
Take these two groups together and we're not far from
that 15% estimate are we?
A bit off-topic but it's an obvious question. Why
does Sweden have a 6% unemployement rate? Why not
zero percent? Barkley Rosser, note above, obviously
gets that Sweden pretty much sets its unemployment
rate and speculates that it's a deliberate policy to
inhibit inflation. That is the Swedish government
chooses the unemployment percentage it thinks it needs
to inhibit worker demands for higher wages.
Any comments?
Posted by: Mark Amerman at Jun 17, 2006 7:54:56 PM
How can I "read the whole thing" when the article is behind the registration wall at the FT?
I hate it when people run a teaser for an article and then I am taken to a website where I CAN NOT READ the article.
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